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Suppose you borrow $100,000 PLAM (Price Level Adjusted Mortgage) for 30 years, monthly payments with $3,000 origination cost.The mortgage rate is 5% with annual outstanding

Suppose you borrow $100,000 PLAM (Price Level Adjusted Mortgage) for 30 years, monthly payments with $3,000 origination cost.The mortgage rate is 5% with annual outstanding balance adjustments based on the following home price information:

Year Home Price

1 4%

2 -5%

3-30 0

Question 49

What is the effective cost of this loan if you holding the loan for only 1 year?

11.72%

11.97%

8.5%

6.73%

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